An Overview of the Lagos State Real Estate Regulatory Authority Law, 2022

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Introduction

On 7th February 2022, the Executive Governor of Lagos State, Mr. Babajide Sanwo-Olu, signed the Lagos State Real Estate Regulatory Authority Bill into Law.[1] The Law introduces significant changes to the real estate landscape in Lagos State.

The Real Estate Regulatory Authority Law 2022 (“the Law” or “RERAL”) was enacted to protect and prevent Lagos State residents from falling prey to fraudulent real estate practitioners and to create some important obligations for stakeholders in the real estate sector.

This article examines some relevant provisions of the Law, and their likely implications on real estate transactions in Lagos state.

Background

Fraudulent activities of fake real estate agents and seemingly licensed developers against accommodation seekers is a rife menace in Lagos State. In June 2019 alone, five (5) suspected fake real estate agents were reported to have defrauded at least 200 prospective tenants.[2] These fake real estate actors deploy various designs ranging from fake or false advertisement of properties upon which they have no title or authority to deal, to disappearing into elusive air after receiving rental and allied funds. This ugly trend led to widespread outcry which were mostly heard by security agencies. Unfortunately, a solution seemed elusive until this recent legislative intervention by the state government.

To apparently curtail this menace, the Law was enacted and the Lagos State Real Estate Regulatory Authority (“LASRERA” or “the Authority”) was established to eliminate the activities of impostors, fraudsters, supposed accredited real estate agents who adopt sharp practices.

Definition of “Real Estate Transaction”

The Law defines “Real Estate Transaction” in Lagos State to mean any service, mortgage or financial exchange between a person or an organisation and the public with respect to matters pertaining to real estate in the State. It includes any transaction regarding real estate in which an agent is employed by one or more of the principals to act in that transaction.[3] This definition is encompassing for real estate transactions in Lagos State.

Establishment of the Lagos State Real Estate Regulatory Authority

The Law establishes the Lagos State Real Estate Regulatory Authority (“LASRERA” or “the Authority”),[4] to exist as a corporate entity vested with powers to sue and be sued in its corporate name.[5] The Authority has the sole responsibility to ensure that all real estate activities are conducted properly and in accordance with the Law and other regulations made by it.[6]

The functions of the Authority includes: the formulation of policies for proper dealings in real estate transactions in the State in line with global best practices; recommendation of policies to the State Government to enhance real estate transactions in the State; maintenance of a comprehensive and updated register of permits of real estate service professionals in the state; registration and issuance of  permits to persons or organisations dealing in real estate transactions in the State and registration of tenancy transactions and agreements above five (5) years, amongst other numerous functions.[7]

Eligibility for Registration as a Real Estate Agent

Further to the requirement that all real estate agents desirous of operating in Lagos State be registered and issued permits, the Real Estate Transactions Law stipulates certain conditions that makes a person or an organisation eligible to practice as a real estate agent in Lagos State.[8]

Consequently, an individual who proposes to deal in real estate in Lagos State must fulfill the following conditions:

  1. be a Nigerian.
  2. possess a valid work permit if a non-Nigerian.
  3. be at least eighteen (I8) years of age.
  4. possess Lagos State Residents Registration Agency (LASRRA) number.
  5. have an ascertained business premises or office within the State.
  6. possess a minimum educational qualification of WAEC, GCE or NECO.
  7. have proper records of transactions and operate a separate client account.
  8. have three (3) years Tax Clearance Certificate preceding the date of registration.
  9. register at least a business name (“BN”) with the Corporate Affairs Commission (“CAC”).[9]

On the other hand, a corporate applicant must fulfill the following conditions:

  1. be registered with the CAC.
  2. have proper records of transactions and operate a separate client account.
  3. one of the company directors must possess the conditions stated in subsection (2) of this section.[10]
  4. ensure that all non-Nigerian Directors have valid work permits and comply with all laws in respect of foreigners.
  5. have three (3) years Tax Clearance Certificate preceding the date of registration.[11]

Issuance and Validity of Permits

In a bid to monitor the activities of real estate agents, the Law requires a person or organisation desirous of dealing in real estate transactions in Lagos and has qualified for registration to pay a fee as prescribed by the Authority for the issuance of a permit.[12] The permit issued by the Regulatory Authority is valid for one (1) year and may be renewed on the satisfactory performance of the conditions for their renewal as stated in the Law.[13]

However, controversies have arisen over the power of the Lagos State Government to enact a law creating an Authority to register, and issue permits to Estate Surveyors and Valuers who provide the services of estate agency in addition to their professional services as licensed surveyors and valuers. Recently, the Estate Surveyors and Valuers Regulatory Board of Nigeria (ESVARBON) and the Nigerian Institute of Estate Surveyors and Valuers (NIESV) filed a suit against the Lagos State Government and the State’s Attorney General and Commissioner for Justice, who were listed as first and second respondents at the Federal High Court, Lagos,[14] (preemptively) challenging the legislative power of the Lagos State Government to enact a law aimed at setting up LASRERA and saddling the Authority with a duty to monitor activities/license anyone who wants to practice as a real estate agent and company within the state. In response, the Respondents filed a preliminary objection challenging the jurisdiction of the Federal High Court to entertain the suit on the ground that the action commenced by the Applicants being a challenge to the constitutionality of the actions of officials of Lagos State Government under a law to be enacted by the House of Assembly of Lagos State, is not one of the matters within the judicial competence of the Federal High Court as conferred by Section 251 of the Constitution of Federal Republic of Nigeria, 1999 (as amended).

In a considered judgment, Justice Chukwujekwu Aneke of the Federal High Court found the respondents’ preliminary objection meritorious and struck out the originating motion. The applicants have indicated their intention to appeal.

Restriction of Foreign Involvement in Real Estate Transaction in Lagos State

The Real Estate Transactions Law now requires every foreigner or foreign company that desires to invest in real estate in Lagos State to seek and obtain the permission of the Governor through the Authority.[15]

Furthermore, the Law stipulates that investment in land by a foreigner(s) cannot exceed twenty-five (25) years including any option to renew.[16] This is subject though, to the provisions of the Acquisition of Land by Aliens Law[17] and any other applicable law on real estate in Lagos State.

By way of commentary, this is reminiscent of the raging legal issue of the right of foreign nationals to own and invest in land under Nigerian Law. A question may arise as to what becomes of a foreigner who has been granted a right of occupancy in Lagos State spanning 99 years? Would such foreigner’s right of occupancy be automatically reduced to a maximum of 25 years?

Section 48 of the Land Use Act (“LUA”) enacts the superiority of the LUA over state land laws. The LUA has made no express prohibition or restriction on foreign ownership or interest in land. Some of such express restrictions are found in pre-LUA legislations made by states including Lagos State (such as the ALAL) and now, the Law (RERAL).

Interestingly however, the term “for the use and common benefit of all Nigerians” found in section 1 of the LUA has been restrictively interpreted by the courts to exclude foreigners from grant of right of occupancy to land.[18] So firstly, to the questions raised above, it is unlikely that a foreigner would be validly granted a term of 99 years in Lagos State. Secondly, the current position in Lagos State is that a foreigner may be granted right of occupancy for a maximum of 25 years. This is the purport of the afore-cited section 28(2) of the Law and Regulation 4 of the Acquisition of Lands by Aliens Regulations.[19]

Establishment of a Committee of Inquiry

The Law makes provision for the establishment of a Committee of Inquiry by the Authority to be referred to as “the Committee” with the primary responsibility of hearing and determining reports of misconduct, complaints, or petitions from the public against persons or organisations dealing in real estate in the State.[20]

Database of Abandoned Buildings/Structures within the State

The Authority is responsible for compiling a database of all identified abandoned buildings or structures within the State and forwarding same to the relevant Ministries, Departments and Agencies (MDAs) for necessary action.[21] The MDAs have a reciprocal obligation to revert to the Authority within the period specified in the notice served on them. The Law considers abandoned buildings or structures to mean:

  1. Buildings/Structures that have not been developed due to lack of funds.
  2. Buildings/Structures that constitute a nuisance.
  3. Buildings/Structures that may jeopardize safety.
  4. Buildings/Structures that contribute to environmental degradation, and
  5. Buildings/Structures that are used as a ground for perpetration of criminal activities.[22]

Where it appears to the relevant MDA(s) that any abandoned or uncompleted building or structure falls under any of the above definitions, the MDA(s) shall serve notice on the owner or occupier of such building or structure either personally or by posting same on the building or structure, requesting the owner occupier to complete the construction of the building or structure or do certain things within a period of three (3) months or within such period as the Authority may deem fit.[23]

In addition, if after the expiration of the period stated in a final notice issued by the relevant MDAs, the owner or occupier of an abandoned or uncompleted building or structure fails to comply with the notice, or is unable to convince the Authority of the ability to complete the building or structure, the Authority is empowered to recommend a revocation, by the appropriate authority, of the subsisting right of occupancy in the abandoned or uncompleted building or structure in accordance with the provisions of the Land Use Act, 1978. However, where the recommendation for revocation of the right of occupancy would amount to injustice and become inequitable, the Authority is mandated to jointly with the owner or occupier of the abandoned or uncompleted building or structure, evolve an arrangement that will serve the purpose or objective of the Law. The arrangement contemplated here seems to be one that would allow the owner or occupier of the property in question reasonable time to either complete the building or structure or put it in proper shape.

Conclusion

The Real Estate Transactions Law undoubtedly contains laudable provisions with the utmost aim of regulating real estate transactions in Lagos State and protecting residents from unscrupulous real estate agents or practitioners. However, recall that by the operation of Sections 21 and 22 of Land Use Act, transactions including for leases for a term of more than three (3) years must receive the consent of the Lagos State Governor after which they must proceed to registration at the Lagos State Lands Registry. Thus, the provision of the Law for registration of tenancy agreements for a term of above five (5) years would appear to increase the already-excruciating pains inflicted on lessees from the obligation to obtain governor’s consent and register such tenancies.

The validity period of the permit is another thought-provoking issue. Though like the recent regime applicable to accredited agents of the Corporate Affairs Commission (CAC) whose continued operation depends on payment of an annual fee, the argument that the validity period is too short may be difficult to refute. The provision appears burdensome as liability for obtaining annual permits would be invariably passed to the final consumers by the real estate agents/practitioners. Ironically, the very subjects to be protected by the new Law may eventually become victims.

It is hoped that this Law will encourage and improve private investment in the real estate sector in Lagos State and boost the internally generated revenue of the state. But this hope is premised on the condition that the bottlenecks that would be incidental to registration of tenancies are curtailed to the barest minimum. Deployment of state-of-the-art digital technology should make the process more seamless and encouraging for real estate actors in the State. LASSRA may either peg the monetary liability for annual permits at a low cost or create a ceiling for rent payments in various locations to prevent arbitrary fees that would end up devouring real estate investments.

Moreover, the restriction of foreign interest or investment in land to 25 years may not mean well for foreign direct investment and Nigeria’s ease of doing business initiatives. In line with section 46 of the LUA, the National Council of States may activate its powers to make regulations to govern foreign interest in land. More importantly, the National Assembly may launch amendment procedure for the LUA to put to rest, the raging controversy on the purport of the terms “for the benefit of all Nigerians” and “any person” within the context of the proper intendment or “mischief” stipulated in the LUA.

_________________________________________________________

For further information on this article and area of law, please contact

Uche Matthew or Olukolade Ehinmosan and Jeremiah Aderinto at:

S. P. A. Ajibade & Co., Lagos

By telephone (+234 1 472 9890), Fax (+234 1 4605092)

Mobile (+234 815 979 4265)

E-mail (umatthew@spaajibade.com, oehinmosan@spaajibade.com, and jaderinto@spaajibade.com)

www.spaajibade.com).

_________________________________________________________

[1]     Kayode Oyero, ‘Mr. Babajide Sanwo-Olu signs bill regulating real estate transactions in Lagos State’ Punch (Lagos, 07 February 2022) https://punchng.com/just-in-sanwo-olu-signs-bill-regulating-real-estate-transactions-in-lagos/ accessed 03 March 2022.

[2]     Punch, ‘Lagos developer defrauds 200 accommodation seekers of N50m’, June 27 2019, available at <https://punchng.com/lagos-developer-defrauds-200-accommodation-seekers-of-n50m/> accessed 30th March 2022 at 3:35 pm. See also, Vanguard, ‘Man in court for allegedly defrauding 2 accommodation seekers’, November 16 2021, available at <https://www.vanguardngr.com/2021/11/man-in-court-for-allegedly-defrauding-2-accommodation-seekers/>  accessed 30th March 2022 at 3:32 pm; Daily Trust, ‘How We Defrauded Accommodation Seekers – Suspects’, Monday, 30 September 2019, available at <https://dailytrust.com/how-we-defrauded-accommodation-seekers-suspects>, accessed 30th March 2022 at 3:11 pm.

[3]     Section 1, Lagos State Real Estate Regulatory Authority Law 2022.

[4]     Section 2(1), Lagos State Real Estate Regulatory Authority Law 2022.

[5]     Section 2(2), Lagos State Real Estate Regulatory Authority Law 2022.

[6]     Section 5, Lagos State Real Estate Regulatory Authority Law 2022.

[7]     Section 6, Lagos State Real Estate Regulatory Authority Law 2022.

[8]     Section 26(1), Lagos State Real Estate Regulatory Authority Law 2022.

[9]     Section 26(2), Lagos State Real Estate Regulatory Authority Law 2022.

[10]    Ibid, especially as these conditions apply to an individual/natural person. For instance, the condition to register a BN at CAC should not be mandatory for the director of an applicant company.

[11]    Section 26(3), Lagos State Real Estate Regulatory Authority Law 2022.

[12]    Section 29(1), Lagos State Real Estate Regulatory Authority Law 2022.

[13]    Section 29(3), Lagos State Real Estate Regulatory Authority Law 2022.

[14]    See, Chinedum Uwaegbulam and Bertram Nwannekanma, ‘ESVARBON to appeal verdict as court backs Lagos on real estate regulation’ The Guardian (Lagos, 29 March 2021) < https://guardian.ng/property/esvarbon-to-appeal-verdict-as-court-backs-lagos-on-real-estate-regulation/. accessed 03 March 2022.

[15]    Section 28(1), Lagos State Real Estate Regulatory Authority Law 2022.

[16]    Section 28(2), Lagos State Real Estate Regulatory Authority Law 2022.

[17]    Cap. A1, Revised Laws of Lagos State 2015 (“ALAL”).

[18]     See Chief S. O. Ogunola & Ors. v. Hoda Eiyekole & Ors (1990) 4 NWLR (Pt. 146) 632 at 642; and Heubner v. A. I. I. (2017) 14 NWLR (Pt. 1586) 397.

[19]     A subsidiary legislation made on 5th July 1971 under the ALAL.

[20]    Section 33, Lagos State Real Estate Regulatory Authority Law 2022.

[21]    Section 37(1), Lagos State Real Estate Regulatory Authority Law 2022.

[22]    Section 38(1), Lagos State Real Estate Regulatory Authority Law 2022.

[23]    Section 38(2), Lagos State Real Estate Regulatory Authority Law 2022.

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